About the Company

Founded in 1993, Jet Airways (India) Limited ("Jet" or the "Company") provides passenger and cargo air transportation services. The Company operates in two business segments (i) Air Transportation and (ii) Leasing of Aircrafts. Jet operates flights to 50 destinations in India and 25 destinations internationally including Abu Dhabi, Bangkok, London, New York, Brussels, Colombo, Dhaka, Johannesburg and Toronto. In Financial Year 2013, the Company's international operations accounted for 59.8 % of its total revenue. Jet currently operates a fleet of 115 aircrafts which includes 10 Boeing 777-300 ER aircrafts, 10 Airbus A330-200 aircrafts, 4 Airbus A330-300 aircrafts, 73 next generation Boeing 737-700/800/900 aircrafts, 10 ATR 72-500 and 1 ATR 72-600 turboprop aircrafts.

Jet-Etihad Deal

In Financial Year 2014, the Company sold a 24 % minority stake to Abu Dhabi's Etihad Airways for US$379 million. A further investment of US$ 150 million is planned which will take Etihad Airways’ stake up to 50.1%. This alliance will bring significant guest benefits with expanded code sharing and by creating a combined network of 140 destinations.

For FY 2014, the Company’s total income from operations grew by 1.04 % to Rs. 19,035.84 Cr. as against Rs. 18,840.56 Cr. in FY 2013. For the same period, the Company reported a net loss of Rs. 4,128.67 Cr. as against a net loss of Rs. 779.28 Cr. in FY 2013.

* The Equity Research Report presented below is based on a Fundamental Analysis of Jet Airways.

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Efficiency Analysis

(%)

Particulars

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

ROCE

(4.28)

6.02

14.74

(0.30)

13.50

(78.42)

ROE / RONW

(28.12)

(12.46)

(5.38)

(1,084.73)

-

-

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Dividend History

* Closing Price as on the date of declaration of final (or last) dividend for the Financial Year.

The Company has maintained an average dividend yield of 0.00 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. Jet’s average current ratio over the last 5 financial years has been 0.36 times which indicates that the Company has not been maintaining sufficient cash to meet its short term obligations.

Long Term Debt to Equity Ratio

Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 - 0.8 could affect the business of a company and its results of operations.

Jet’s average long term debt to equity ratio over the last 5 financial years has been 22.97 times which indicates that the Company operates with very high level of debt and is not placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company's ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

Jet’s average interest coverage ratio over the last 5 financial years has been 0.39 times which indicates that the Company has not been generating enough for the shareholders after servicing its debt obligations.

Ownership pattern

(%)

Shareholding

March 2010

March 2011

March 2012

March 2013

March 2014

Promoter

79.99

80.00

80.00

75.00

51.00

FIIs

6.66

4.61

6.70

7.18

4.27

DIIs

8.56

9.87

6.94

8.29

4.82

Others

4.78

5.52

6.36

9.53

39.91

In its latest stock exchange filing dated 31 March 2014, Jet reported a promoter holding of 51.00 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 9.09 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

Final Score Based on Fundamental Analysis of Jet Airways (India) Limited